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Pfizer and Allergan weigh up big pharma mega-merger Pfizer and Allergan weigh up big pharma mega-merger
(about 2 hours later)
Pfizer and Allergan are considering a merger that would unite the US makers of Viagra and Botox to create a drugs giant worth more than $300bn.Pfizer and Allergan are considering a merger that would unite the US makers of Viagra and Botox to create a drugs giant worth more than $300bn.
The Wall Street Journal reported that Pfizer had approached Allergan, but cautioned that the process was at an early stage and might not lead to a deal.The Wall Street Journal reported that Pfizer had approached Allergan, but cautioned that the process was at an early stage and might not lead to a deal.
The mega-merger would be by far the biggest in a flurry of deals in the industry this year. Allergan has a market value of $113bn (£81bn); Pfizer is worth $219bn. Together they would overtake Johnson & Johnson, worth $278bn, as the world’s largest healthcare company.The mega-merger would be by far the biggest in a flurry of deals in the industry this year. Allergan has a market value of $113bn (£81bn); Pfizer is worth $219bn. Together they would overtake Johnson & Johnson, worth $278bn, as the world’s largest healthcare company.
Pfizer is attracted to Allergan because it is domiciled in Ireland and its tax rate is far below Pfizer’s in the US. The New York-based drug maker had a stab at shifting its tax base last year, but failed in its £70bn takeover attempt of British firm AstraZeneca.Pfizer is attracted to Allergan because it is domiciled in Ireland and its tax rate is far below Pfizer’s in the US. The New York-based drug maker had a stab at shifting its tax base last year, but failed in its £70bn takeover attempt of British firm AstraZeneca.
Last autumn, a US crackdown on tax avoidance deals scuppered AbbVie’s agreed takeover of Shire, which is based in Dublin, like Allergan. It is unclear whether the rule changes would affect the potential tax advantages from a Pfizer-Allergan deal.Last autumn, a US crackdown on tax avoidance deals scuppered AbbVie’s agreed takeover of Shire, which is based in Dublin, like Allergan. It is unclear whether the rule changes would affect the potential tax advantages from a Pfizer-Allergan deal.
Pfizer also wants to beef up its branded-drug portfolio after boosting its off-patent business with the $16bn acquisition of Hospira at the start of the year. Pfizer also wants to beef up its branded-drug portfolio after boosting its off-patent business with the $16bn acquisition of Hospira at the start of the year. Pfizer boss Ian Read has made no secret of his desire to split the two businesses at some point.
WBB Securities’ analyst Stephen Brozak said: “When you’re the size of Pfizer, an acquisition like this may be the only choice you have in order to be able to move the needle for sequential growth ... so the question now becomes, if not this, what? And if not now, when?” Stephen Brozak, analyst at WBB Securities, said: “When you’re the size of Pfizer, an acquisition like this may be the only choice you have in order to be able to move the needle for sequential growth ... so the question now becomes, if not this, what? And if not now, when?”
Pfizer produces Viagra and the cholesterol pill Lipitor, once the world’s bestselling drug; Allergan is best known for Botox and also makes the dry-eye treatment Restasis.Pfizer produces Viagra and the cholesterol pill Lipitor, once the world’s bestselling drug; Allergan is best known for Botox and also makes the dry-eye treatment Restasis.
Shares in Allergan jumped 11% to $320 in pre-market trade on the reports. In London, GlaxoSmithKline and Shire shares fell by 1.5% and 2.4% respectively, as Pfizer had been mooted as a potential buyer for the companies. AstraZeneca was down by 0.8%. Shares in Allergan jumped nearly 9% to $312.45 in on the reports. In London, GlaxoSmithKline and Shire shares were down 1.5% and 2.4% respectively, as Pfizer had been mooted as a potential buyer for the companies. AstraZeneca was down by 0.8%.
Pfizer previously failed in its attempt to buy Actavis, which went on to acquire Allergan and adopted the company’s name. Pfizer previously failed in its attempt to buy Actavis, which went on to acquire Allergan and adopted the company’s name. Allergan sold its generic business to Israel’s Teva Pharmaceutical for $40.5bn in July.
Analysts said one of the main hurdles in the way of a Pfizer-Allergan deal was price. Jonathan Morgan, head of research at The Edge Consulting Group, said: “Looking at valuations, Allergan trades at a higher multiple versus GSK – or for that matter AstraZeneca – and we believe the pricing of the deal may be something of an obstacle.
“If the deal does go through a further restructuring at Pfizer would be a possibility, as the company at some point would like to separate its patent-protected drugs portfolio from its off-patented drugs.”